Lawful Consideration & Object

A. Lawful Consideration:

1. Introduction:

For the valid contract the presence of consideration is an important factor. When an agreement is without the consideration then it is void. In England, the contracts are divided into two types:

1. Contracts under seal or contracts in the form of deed. Such contracts are valid without consideration.

2. Simple contracts or parol contracts. Such contracts are valid only on the presence of consideration.

Consideration means something in exchange for the promise. It may be either benefit conferred on one party or some detriment suffered by the other.

2. Definition of Consideration:

As per section 2(d) of the Indian Contract Act, 1862, the consideration is

“When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstention or promise is called a consideration for the promise.”

3. Requirements of Valid Consideration:

1. Consideration to be given ‘at the will of the promisor’.

2. Consideration to be given ‘by the promise or any other person’.

3. Consideration can be past, present, future so definition of consideration says that the promise:

a. has done or abstained from doing or

b. does or abstains from doing or

c. promises to do or to abstain from doing, something.

4. There should be some act, abstains or promise by the promise, which constitutes consideration for the promise.

B. Lawful Object:

1. Introduction:

Lawful object in a contract is the purpose for which the parties enter into the contract. When the lawful object gets completed then it leads to the transfer of the consideration agreed from one party to the other. Basically, lawful object is should not be against the public policy.

C. Legal Consideration and Object:

1. Introduction:

For the valid contract, the consideration and the object should be lawful. Every agreement where the object and consideration is unlawful then the agreement is void. As per Section 23 of the Indian Contract Act, 1872 What considerations and objects are lawful and what not:

It is prohibited by law, or is of such a nature that, if allowed, it would defeat the provisions of law; or is fraudulent; or involves or inferred injury to the person or property of another, or the court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful.

Illustrations:

a. Mr. Arjun agrees to sell his motor cycle to Mr. Raj for Rs. 50,000/-. Here Mr. Raj’s promise to pay the sum of Rs. 50,000/- is the consideration for Mr. Arjun’s promise to sell the motor cycle is the consideration for Mr. Raj’s promise to pay Rs. 50,000/-. These are lawful considerations.

2. Cases where the consideration or object considered to be unlawful:

1) It is forbidden by law:

When something is forbidden by law, an agreement to do that is unlawful. An agreement to do what has been forbidden by the Indian Penal Code or by some other law cannot be enforced. A contract to pay some money if a crime or tort is committed is not enforceable. If the contract specifically indemnifying a person against liability for an intentional wrong like deceit, it is unlawful.

An agreement offending a public policy is void from the starting and the same cannot become valid even if the parties agree to that effect.

Case Law: Universal Plast Ltd. V. Santosh Kumar[1]

In this case, the Textile Commissioner issued an order under the Essential Commodities Act forbidding transfer of spindles by any person without the prior permission of the Textile Commissioner. The plaintiff, who owned 4,200 spindles with motors and accessories in Ludhiana agreed to sell the same to the defendant for Rs. 1,02,440 /- receiving an advance of Rs. 10,000/- from the defendant. In an action by the plaintiff to recover the balance of Rs. 92,440/- it was held that the same was not recoverable as the transfer of spindles was illegal. For the same reason it was further held that the buyer could not recover the advance of Rs. 10,000/- paid by him.

2) It would defeat the provisions of any law:

If the object or consideration of an agreement is of such a nature that, if it is permitted, it would defeat the provisions of any law, such an agreement is void. Certain acts may not be expressly forbidden by law, but if they result in circumventing any law, they cannot be encouraged.

Case Law: Ram Sewak v. Ram Charan[2]

In this case, the parties agreed to carry on business I partnership. The agreement provided that they would conceal some part of their business activity and would not enter certain items in the books of accounts with a view to evading payment of income tax and sales tax. One of the partners brought an action against others for accounts and also for the recovery of the amount due to him. His action was dismissed and it was held that the agreement was aimed at defeating the provisions of Tax laws, it was opposed to public policy and so not enforceable.

3) It is fraudulent purpose:

If the consideration or object of an agreement is to commit fraud, the agreement is void. For example. X, Y, and Z enter into an agreement for the division among them of gains acquired, or to be acquired by them by fraud. The agreement is invalid, as its object is not lawful.

Case Law: Manni Ram v. Purshottam Lal[3]

In this case, A knew that the railway company would not grant him a contract. So A entered into a contract with B that B should propose an application for the contract and after the contract was granted, A shall serve as the real contractor. A bring an action to put his claim as the real contractor. It was held that the object of the agreement was to commit fraud upon the Railway Company and so the agreement was void.

4) It involves or implies injury to the person or property of another

If the consideration or the object of an agreement is to cause an injury to the person or property of another person, then the agreement is unlawful and hence it is void. Injury here means unlawful harm, for example, an agreement to commit fraud or a tort. If the borrower of money is made to execute a bond requiring him to do manual labour until repayment, and forces a heavy penalty on default in the form of exorbitant rate of interest, agreement contained in the bond virtually amounts to slavery therefore, such an agreement is opposed to public policy and so it is void.

5) Immoral:

If the consideration or object an agreement is regarded by the court to be immoral or opposed to public policy, the agreement is unlawful and the same has also been declared void. For e.g., C agrees to let her daughter for hire to D for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under Indian Penal Code. What is immoral is not defined by the Indian Contract Act then immorality depends on the norms accepted by the society at a particular point of time.

Case Law: Bai Vijil v. Nansa Nagar[4]

In this case, the plaintiff advanced loan to the defendant, a married woman, to enable her to get divorce against her husband and then marry to the plaintiff. The object of the agreement was held to be immoral and the plaintiff was not entitled to recover the loan so advanced.

D. References:

1.https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-ii/legality-of-object-and-consideration/#:~:text=each%20of%20them.-,1%5D%20Forbidden%20by%20Law,contract%20cannot%20be%20valid%20anymore.

2. https://www.vedantu.com/commerce/legality-of-object-and-consideration

3. https://blog.ipleaders.in/legality-objects/

4. https://monad.edu.in/img/media/uploads/lawful%20consideration.pdf

5. https://indiankanoon.org/doc/1625889/


[1] https://indiankanoon.org/doc/890940/

[2] https://indiankanoon.org/doc/1704234/

[3] https://indiankanoon.org/doc/402604/

[4] https://blog.ipleaders.in/immoral-agreements-contract/

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Create a website or blog at WordPress.com

Up ↑

%d bloggers like this: